401k

KSR6450

I am venting here, but would appreciate some feedback.

How much do you try to help your employees with their 401k? I have an employee who is trying to place her funds into a ‘fixed’ account. She is not very computer savvy and therefore cannot (will not) look up her information on the website of our 401k provider. I have given her the necessary forms and have repeatedly explained to her how to change where her funds are being placed. Today she brings in the forms and asks which fund she should choose. She got upset with me when I told her that I cannot guide her investments and she needs to do her own research on the funds available. How much hand holding must I provide?

Dutch2

You are correct in not giving fund advice. If you recommend a fund(s) and the bottom falls out, the ee could hold the employer liable for giving them bad advice. I have printed out the prospectus of the funds with a chart of how the funds have done over the past 3 mos, 1 yr, 5 yr, 10 yr, etc., to help the ee make their decision but I will not give any recommentations as to where they place their money. We do have target date default funds for anyone that does not select a fund. In fact within the first quarter we are going to do a mandatory default session with all of our participants. Unless they return a form to us saying they do not wish to participate they will be automatically placed in the target date fund. These funds are based upon the age of the participant and will automatically grow less aggressive as the ee gets nearer retirement age.

KSR6450

Thanks for the input Dutch. I know the potential for a lawsuit is there and that is why I refused to help her. I won't even give my boyfriend investment advice, and I don't believe he would sue me... :-?

Do you automatically sign up eligible employees into the 401k plan? I worked at a Bank years ago where they did that - when I left I had a whole $265.00! No one had ever told me the contributions were being made on my behalf. Does a representative from your provider come out and discuss the plan with your employees on a periodic basis? We have not had anyone come out since the initial set up 5 years ago.

Dutch2

We do have an automatic enrollment clause in our plan; however, I have never had to use it. I prepare the enrollment packet and basically stay in contact with the ee(s) via email and/or phone until I receive their completed enrollment form. We are a Safe Harbor Plan so every eligible ee receives a contribution to their account (3%) even if they do not contribute anything themselves, therefore, I stay after them to ensure they turn in their enrollment form. We do have a representative from a 3rd party that we hired to assist with our plan, they are also a co-fiduciary of the plan (if I go to jail - they go with me). We normally hold these meetings in the first quarter of each year. This 3rd party works in the background to ensure that we do all the due diligence we are supposed to complete. If our ee's have any questions about fund investment they can contact this company, but they will simply recommend the target date fund that fits their age group.

NaeNae55

I always remind our employees that the company can be held liable if I give any advice. That seems to help them understand that I cannot help them decide where to put their money. That said, we started using a broker about 5 years ago when we moved to a new provider. It has been a real blessing. Not only do I get quick answers to my questions as I am able to develope a good relationship with the broker, but I always send employees and their questions to him. Anything from investment advice to how the website works gets directed to him.

If I did not have a provider available I would tell the employee to go ask their financial advisor (or accountant). They probably don't want to pay one, so they come to you. But their retirement is really their responsibility, not yours.

Good luck!

Nae

stilldazed

Agree with other posters. Don't give the advice. We don't, and I'm clear with staff that I cannot and will not make their decisions for them. I'm always happy to explain, provide information, answer questions an employee may have (or try to find answers for the employee), but that's it. I also explain to staff that any advice I give becomes advice of the company and something I must refrain from doing. I usually also explain that I am not familiar enough with their individual circumstances and not will to accept responsibility in case the decision turns sour.

best wishes

Muti

We are a bank and we do have automatic enrollment. We provide enough information to our new hires so that they can make a decision prior to the automatic feature kicking in (after 60 days). The most that we do to assist employees is guide them through a website that our vendor provides. We also have a rep come out (first quarter of each year) to educate the employees on investments. This vendor is also available by phone. You are right to stay away from giving advice yourself; no good deed goes unpunished.

KSR6450

Thanks everybody!

Sometimes it is nice to hear that you aren't being an 'evil HR Officer' and that you made the right call. I will try to get a representative to come out and go over the various funds, since that seems to be normal request. Working for a financial institution most of our employees are knowledgable about the market and which funds to choose, but there are always those that need guidance!

Dasher

I want to second Nae Nae's broker option. I have found the one I use extremely beneficial. They are in a much better position to speak with the employee -- and finally I have one who talks in language anyone can understand.

Yes, we have automatic enrollment and I still will listen to employees. Advice -- I'll stick to the HR stuff I know and leave the $ matters to others.

Good luck.